Understanding Life Expectancy

Knowing your life expectancy can help you make informed
decisions about retirement in general, and social security
benefits in particular. Many people underestimate their life
expectancy because they don't realize it changes as they grow
older.

Basic Life Expectancy

We sometimes hear statistics about what might be called basic
life expectancy. This is simply the average age at which people
die. Find the ages of all the people who died in a relevant
period, add them together and divide by the number of people,
and you have life expectancy. The actual process is more
complex, but that is the basic idea.

Life Expectancy at a Later Age

Your life expectancy changes as you grow older because the
formula leaves out the people who died at ages younger than your
current age. For example, if we're trying to determine your life
expectancy at a time when you're 50 years old, we don't average
in the numbers for people who died before reaching age 50. At
this point we're asking what is the average number of years
people live beyond age 50, once they've reached that age. That's
a higher number than the average for all people, because we're
eliminating people who died when they were younger. Here are
some numbers from
this table
on the web site of the Social Security Administration:

Life Expectancy

Male

Female

At birth

74.0

79.4

Age 50

27.6

31.6

You can see that a male at birth is expected to live to an
average age of 74, but having reached age 50 he is expected (on
average) to make it to age 77.6.

Gaining Ground

At age 50 you haven't gained much ground in the life
expectancy sweepstakes. The average date of death for people who
reach that age isn't much later than for all people in general,
because it's a small minority of people who die before that age.
As you move into later years, you gain ground more rapidly,
because you're surviving past years when a larger number of
people died. At age 65, a male is expected to survive almost 16
more years, to about age 81, and a female almost 19 more years,
to about age 84.

Some people are surprised by these numbers. All their lives
they heard about life expectancies somewhere in the 70's, so at
age 65 they figure the odds of living another decade aren't very
good. In reality, at age 65 the average male can expect to
survive past his 80th birthday, and the average female even
longer.

It can be a big mistake to plan your
retirement around the idea that you're going to die in your
70's.

You Aren't Average

You aren't the average person, of course, and you can't count
on living as long as the tables say, no matter what your current
age. The tables are based on the broad population, including
smokers and non-smokers, marathoners and couch potatoes, and
people with all sorts of good and bad indications for longevity.
You may get a more realistic picture if you adjust what you read
in the tables based on knowledge of your own factors.

Playing the Odds

In any event, you have to allow for good or bad luck. Some
people plan to run out of money when they die, but forget to die
on schedule. Make sure your needs will be covered even if you
live longer than you might expect based on the life expectancy
tables and your own health factors.

Life Expectancy

You don't know how long you're going to live, of course, but
it may help to know the average life expectancy of people your
age. You can find that in
this table
on the web site of the Social Security Administration. The
numbers there tell us that the average person does better by
waiting until full retirement age. For example, a 63-year-old
male has a life expectancy of 17.25 years. If a man with a full
retirement age of 66 begins his benefit at age 63, he can expect
(on average) to live 27 months (two and one-fourth years) past
the break-even point, when the later benefit catches up with the
earlier benefit. His twin (the one who waits until full
retirement age to begin benefits) comes out better. For a woman,
the difference is greater. Her life expectancy at age 63 is
about 20.5 years, giving her 66 months (five and one-half years)
after the break-even point.

For the average person, the choice to start receiving
retirement benefits early will ultimately mean receiving a
smaller total lifetime benefit. If you have reason to believe
your personal life expectancy is shorter than average, you may
come out better by starting your benefit early, especially if
you're a male. People with average or better life expectancy,
especially females, should think twice about starting the
benefit early. You may still want to make that choice for other
reasons, such as having money to travel while you're young
enough to enjoy it, but the long-term consequences of that
decision won't be favorable if you live far beyond the
break-even point.